Steady remittances from the U.S. and nearshoring have been highlighted as some of the reasons for the currency's appreciation against the U.S. dollar. (Stock image)
The central bank has raised its benchmark interest rate by 75 basis points to 7.75%, the highest level since late 2019.
It was the first time since the introduction of a new monetary policy regime in 2008 that the Bank of México (Banxico) lifted its key rate by three-quarters of a percentage point. The decision, made at the governing board’s meeting on Thursday, followed 0.5% hikes at each of the previous four meetings. Banxico has now lifted rates at nine consecutive meetings.
In a statement, the bank noted that in the first half of June, headline and core inflation reached 7.88% and 7.47%, respectively, “remaining at elevated levels unseen in two decades.”
In addition to inflationary shocks stemming from the pandemic, Banxico said there were inflationary pressures associated with Russia’s invasion of Ukraine and strict lockdown measures imposed by China to slow the spread of the coronavirus.
In consideration of “the magnitude and diversity of the shocks that have affected inflation” and “the increasing challenges for monetary policy stemming from the ongoing tightening of global financial conditions,” among other factors, the board decided unanimously to raise the target for the overnight interbank rate by 75 basis points.
The bank said the board intends to continue raising the reference rate, foreshadowing another 0.75% hike if required by economic conditions.
Janneth Quiroz, deputy director of economic analysis at the Monex financial group, and Adrián Muñiz, who holds the same position at the brokerage firm Vector, both said that another 0.75% hike rate, or even a 100-basis-point one, is not out of the question in the near future. The bank’s future decisions will depend on inflation levels and monetary policy in the United States, they said.
The central bank predicted that headline inflation, which doesn’t strip out volatile food and energy prices, will increase to 8.1% in the third quarter before falling to 7.5% in Q4. It forecasts further declines in all four quarters of next year, with an anticipated headline rate of 3.2% at the end of next year and 3.1% in Q2 of 2024. Banxico targets 3% annual inflation with tolerance of 1% in both directions
Nuevo Nayarit (formerly Nuevo Vallarta) came in No. 2 for highest hotel occupancy in Mexico. (File photo)
Planning a trip to Nuevo Vallarta, the popular tourist development just north of Puerto Vallarta?
Not anymore you’re not.
The name of the tailored enclave — known for its luxury accommodations, golf courses, marina and long, sandy beach — was officially changed to Nuevo Nayarit in a vote this week by the local municipal council.
The new name makes sense to some, since the development is in the state of Nayarit, across the Río Ameca from Puerto Vallarta, Jalisco, and is the southernmost part of the 300-kilometer stretch of coastline that for 15 years has been branded as the Riviera Nayarit.
In fact, the governor of Nayarit, Miguel Ángel Navarro Quintero, has been the No. 1 proponent of the renaming since he announced it out of left field in early January. “We are no longer determined to promote a municipality in the neighboring state, but rather our own municipalities and our own state,” he declared at the time.
Shortly thereafter, a huge sign welcoming people to the area was changed to “Bienvenidos a Nuevo Nayarit.”
But numerous business people, residents, property owners and members of the tourist industry and chamber of commerceare up in arms for a handful of reasons. Many, for example, like how the name Nuevo Vallarta created a marketable twinning with Puerto Vallarta.
Moreover, some accused the governor of strong-arming the mayor and members of the Bahía de Banderas municipal council into voting for the change.
One local sign was changed from “Welcome to Nuevo Vallarta” to “Welcome to Nuevo Nayarit,” shortly after the governor proposed the name change in January. Vallarta Independiente
The 14-member council of the municipality, which includes the newly-named Nuevo Nayarit, approved the new name at its June 21 meeting by simple majority.
That meeting turned into something of a circus, with opponents of the name change trying in vain to voice their opinions. After an hour of rigmarole and threats that the meeting would be suspended, a vote was finally taken.
The newspaper Tribuna de la Bahía reported that opponents of the Nuevo Nayarit name confronted the municipal council for “not listening to them and changing the name of Nuevo Vallarta just by raising their hands.” At one point, the session was interrupted by citizens who wanted to present all of the economic and legal implications of the name change — so the council members could cast an informed vote.
Nuevo Vallarta has been sold as a tourist brand alongside Puerto Vallarta for nearly four decades. José Ludwig Estrada Virgen, a longtime but now retired tourism director for Puerto Vallarta, said he regretted the name change, as it will undermine joint promotion efforts and will have repercussions for the region.
Afterward, Daniela Ramírez, a resident in the area, accused the elected officials of going against the will of the people and succumbing to “political whims.”
“If they are listening to the people, then they do not change that name,” she said. “We are going to go forward with lawsuits and injunctions.”
The newspaper Vallarta Independiente reported that mayor of Bahía de Banderas, Mirtha Villalvazo Amaya, said she did not want to change the name when queried in January, right after the governor’s announcement had taken everybody by surprise. She told reporters, “in an annoyed tone,” that his decision was made hastily and without consulting her, business people, those who promote tourism in the region and residents. However, this week she had changed her tune and said it was a good thing for Bahía, and she voted for the change at the meeting.
Milton Colmenares wrote in the Vallarta Independiente: “Sitting well with the governor has become a priority, even though this means trampling on the voice of the citizenry.”
Council member María del Carmen Arreola told the newspaper Meridiano: “For us who live in this place, it is vitally important to have our own identity. It is time to emancipate ourselves with a vision based on what the region represents in tourism, economic and visionary matters. The neighboring municipality of Puerto Vallarta is always recognized for what it contributed to this destination … I know that it is the right time to enhance the Nuevo Nayarit brand, and I join the effort to have its own identity.”
Face mask mandates are back in some states as the fifth wave gains strength. deposit photos
Active coronavirus cases have almost tripled in the last two weeks as Mexico’s fifth wave of infections continues to worsen.
The estimated active case tally rose to 91,559 on Thursday, an increase of 178% compared to the June 9 count of 32,957.
Baja California Sur has the highest number of active cases per 100,000 people with over 300. Mexico City, which also has more than 300, is a close second followed by Quintana Roo, where there are over 200 active infections per 100,000 people. Sinaloa and Yucatán round out the top five with over 150 active cases per 100,000 residents.
The Health Ministry reported 16,133 new cases on Thursday, the highest single-day tally since late February. Mexico’s accumulated case tally stands at 5.92 million while the official COVID-19 death toll is 325,511 after 24 additional fatalities were reported Thursday.
The recent rise in case numbers hasn’t exerted any significant pressure on the health system. Just 5% of general care beds set aside for COVID patients are currently occupied while only 1% of those with ventilators are in use.
Francisco Moreno, an infectious disease and internal medicine doctor at the ABC Medical Center in Mexico City, said Thursday that the fifth wave could last until late July. Daily case numbers will likely start to come down in August, he said. In an interview with the newspaper El Financiero, Moreno warned that case numbers could spike again in winter, when viruses tend to spread more easily. He advised people with COVID to isolate for at least 10 days.
“If you feel sick don’t go to work. … If you live with someone who is vulnerable, don’t … [go near them] for 10 days,” Moreno said.
Authorities in some states, including Baja California Sur, Nayarit, San Luis Potosí and Tamaulipas, have decided to end the school year earlier than scheduled due to the recent increase in case numbers.
Meanwhile, some states have reintroduced mask mandates. Authorities in Durango and San Luis Potosí have reintroduced mask mandates for all public spaces, while the Puebla government has once again made the use of masks mandatory in enclosed public spaces. Authorities in some other states, including those in Guanajuato and Querétaro, have recommended that citizens once again use face masks due to the recent spike in infections.
The official results of last week's technical review will be released within a month, the Transportation Ministry said. DepositPhotos
Mexico is still at least months away from recovering its Category 1 aviation safety rating with United States aviation authorities after reportedly failing a technical review last week.
The Ministry of Infrastructure, Communications and Transportation (SICT) said in a statement Thursday that the process to regain the top-tier rating Mexico lost in May 2021 is ongoing but predicted it would conclude “in the coming months.”
The U.S. Federal Aviation Administration (FAA) has conducted seven reviews of Mexico’s aviation sector since it downgraded the country’s safety rating to Category 2 due to non-compliance with minimum International Civil Aviation Organization safety standards, but it could carry out 10 reviews before deciding whether to restore the Category 1 rating.
When it downgraded Mexico 13 months ago, the U.S. authority said that “a Category 2 rating means that the country’s laws or regulations lack the necessary requirements to oversee the country’s air carriers in accordance with minimum international safety standards, or the civil aviation authority is lacking in one or more areas such as technical expertise, trained personnel, record keeping, inspection procedures, or resolution of safety concerns.”
The downgrade prevented Mexican airlines from adding new flights to the United States.
The FAA’s most recent technical review was carried out last week at the request of Mexico’s Federal Civil Aviation Agency (AFAC), SICT said.
“The results of that inspection will be announced in the next 30 days,” the ministry said, adding that the review “served as an analysis prior to the definitive audit that will occur in the coming months.”
SICT said that FAA specialists determined that the problems identified last year had been rectified but raised concerns about “aspects related to aviation legislation, financial resources and budget, hiring of suitable personnel … [and] … the operation of several technical and air inspection systems.”
Mexico lost its Category 1 safety rating over a year ago due to non-compliance with minimum International Civil Aviation Organization safety standards, which include technical expertise, personnel training, record keeping and more. Twitter @SENEAM_mx
“The date for the next evaluation with the FAA has not yet been determined, but from the beginning [of the process] a maximum of 10 reviews was established,” the ministry said.
“For SICT the final objective is not just to recover the Category 1 aviation [safety rating], but to provide continuity to the process of administrative, financial and training improvement that guarantees the safety of the millions of Mexicans that use air navigation services both at national and foreign airports.”
While SICT said that the results of the latest review won’t be announced until the end of July, people who spoke with the newspapers Reforma and Milenio asserted that Mexico failed last week’s inspection.
Rogelio Rodríguez, an aviation expert and former executive with AFAC’s predecessor, said that Mexico still hasn’t resolved the issues that led to the downgrade to Category 2, despite SICT’s statement to the contrary. He specifically cited shortcomings in the assessment and training of AFAC personnel.
Rodríguez told Reforma that AFAC wasn’t able to show the FAA that it carries out reviews of its personnel to ensure they are in an “optimal state of psycho-physical health.” In addition, it couldn’t prove that AFAC inspectors have completed adequate training, he said.
“Mexico failed,” Rodríguez said, adding that the process to recover the Category 1 rating is “uncertain” given that “there are no dates or commitments to carry out the technical review again.”
SICT said that AFAC will ask the FAA to conduct a final audit “in due course.”
A federal government official who spoke with Milenio on the condition of anonymity said the FAA detected more than 20 new deficiencies during last week’s review. The official said that 28 previously identified issues have been resolved but a similar number of new problems was found.
One issue already identified by an international pilots’ organization: AICM staff apparently received little training on how to direct air traffic in the new airspace configuration that was created when Felipe Ángeles International Airport (AIFA) opened north of the capital.
“They’re matters of procedures and budgets. What will be put forward [by the FAA] is to fix all that,” the functionary said.
While Mexico apparently failed last week’s review, it hasn’t failed the overall process to regain the Category 1 rating because it has the opportunity to address the newly identified deficiencies in the coming months, the person said. The official asserted that the issues can be resolved “without problems” and predicted that the top-tier rating will be reinstated in November or December.
SICT initially pledged to recover the Category 1 rating within four months of the downgrade, while Foreign Affairs Minister Marcelo Ebrard suggested that it would be regained in the first half of this year.
An anonymous Reforma source who asserted that Mexico failed last week’s review due to staff hiring and training concerns criticized the federal government for a lack of interest in the aviation sector.
“There is no deadline, no timetable [to recover the Category 1 rating], and Mexico is still not ready. The present administration is not interested in aviation … and while this view doesn’t change we’ll continue in this situation,” said the source.
Rodríguez said last month that AFAC hadn’t taken any decisive action that will help Mexico regain its Category 1 rating. No additional resources have been allocated to address the FAA’s concerns, he said, adding that there has been a “chain of systematic failures in the [aviation] sector due to the lack of training of key personnel, such as [air traffic] controllers.”
That revelation, published by Reforma last month, came shortly after two dangerous incidents at the Mexico City International Airport that were caused by air traffic control errors. Pilots of a Volaris plane narrowly averted a disaster May 7 after they were cleared to land on a runway occupied by another aircraft. A similar incident occurred four days later.
President López Obrador on Friday rejected reports that there are unaddressed deficiencies in Mexico’s aviation sector. “A review is being done, all the requirements are being met and I expect there won’t be any problem” in regaining the Category 1 rating,” he said.
“Of course, … there are many interests, starting with those who don’t like us and who are still annoyed because the Lake Texcoco airport wasn’t built. They haven’t got over the anger yet,” López Obrador said.
“… We’re seeking to give responses to all the requests … [the FAA] makes to us,” he said. “Not all international organizations are honest,” the president added. “… In general, the interests of groups, business groups, financial groups, are always there.”
Inocente "Chente" Castellanos at a campaign rally.
Inocente Castellanos is one of just two openly gay mayors currently in office in Mexico, and the first ever in Oaxaca, but the “accidental” politician says his sexuality hasn’t been an issue since he took the top job in Santa Cruz Xoxocotlán.
Castellanos was elected mayor at an extraordinary election held earlier this year after the result of last year’s close contest was annulled because the triumphant Morena party candidate was found to have violated electoral laws.
He has now been in the job almost three months, while his partner of almost 20 years, Eric Emmanuel Ortiz, is honorary president of the municipal branch of the DIF family services agency, a position traditionally occupied by the (usually female) spouses of presidents, governors and mayors.
In an interview with the El Universal newspaper, Castellanos – elected on a PAN-PRI-PRD ticket after initially running as a Fuerza por México candidate – said that he hasn’t experienced any discrimination from residents of Xoxocotlán, part of the metropolitan area of Oaxaca city, or municipal government staff since taking office in early April. On the contrary, there has been complete acceptance, remarked the 56-year-old mayor.
Castellanos swears in his partner, Eric Emmanuel Ortiz, as honorary president of the municipal family services agency. Red de Información Ciudadana en Oaxaca
However, Castellanos admitted to having some concerns about how people would react to his partner’s appointment as honorary DIF president. That said, he concluded there was no reason that Ortiz couldn’t occupy the position.
“We’re human beings as normal as anyone else and [non-heterosexual] sexual orientation is now recognized around the world,” Castellanos said. “So I don’t see a problem in my partner representing [an agency that works in] such a sensitive area. … He’s a great human, a professional, he’s prepared, he has a dignified life and therefore he can occupy this position without any problem,” he said.
What people care about are results rather than a person’s sexuality, Ortiz told El Universal. “They expect a good government and that’s what they’re going to get. … They expect that you’ll work and think about families,” he said.
Castellanos, a dental surgeon, hadn’t expected to be in the position in which he currently finds himself. At the start of the pandemic he decided to help out in the delivery of aid to people struggling to survive amid a near-total economic shutdown. While doing so, some recipients asked him whether he was running for mayor and what political party he represented, sowing a seed that would eventually lead to him standing as a candidate at the 2021 mayoral election.
While Castellanos lost that race, the Federal Electoral Tribunal’s annulment of the election gave him a second chance that ultimately allowed him to get his hands on the mayoral mace.
While he hasn’t experienced any discrimination since becoming mayor, Castellanos acknowledged that his sexuality was used to attack him in the campaign period in the lead-up to the extraordinary election. He attributed the attacks to a “dirty war” against him, noting that his adversaries had no real grounds on which to criticize him because he has no record of corruption or any other wrongdoing in public life.
While some of those opposed to him becoming mayor attempted to portray his sexuality as a weakness, Castellanos said that being gay has never made him weak. “I’m a person whose preferences never limited my growth [and never stopped me from] being the person I am today,” he said.
The only other openly gay mayor currently in office is Adolfo Cerqueda Rebollo, mayor of Nezahualcóyotl, México state. Mexico has only had one other mayor who publicly identified himself as being gay: Benjamín Medrano, mayor of Fresnillo, Zacatecas, between 2013 and 2014.
The corruption scheme allegedly happened during the administration of Coahuila Governor Rubén Moreira, between 2011 and 2017. Twitter
Seven years after investigators in Chihuahua uncovered an embezzlement scheme dubbed “Operation Sapphire,” a very similar situation has been illuminated in Coahuila with federal charges filed against the state’s former finance minister.
Ismael Eugenio Ramos Flores, who worked in the 2011-17 administration of Coahuila governor Rubén Moreira, has been accused by the federal Attorney General’s Office (FGR) of diverting approximately 475 million pesos (US $23.8 million), according to evidence presented this week before a federal judge.
The money allegedly was taken from the Fund for Financial Strengthening (Fortafin), a national program created by the government of former President Enrique Peña Nieto, who served from 2012 to 2018. Mexico’s budget policy and finance departments could assign money from that fund to states on a discretionary, as-needed basis.
The charges against Ramos Flores said the 475 million pesos were diverted through 15 simulated contracts for the provision of services such as courses and consultancies. At the hearing, prosecutors from the government’s anti-corruption office presented evidence that the services were contracted irregularly.
The FGR presented evidence this week that they say shows Ramos Flores diverted nearly 500 million pesos through the Fortafin fund.
According to the news website Animal Politico, Ramos Flores signed four Fortafin agreements in 2015 for 477 million pesos; in 2016, he signed nine agreements for 1.4 billion pesos; and in 2017, he signed seven for 1.1 billion pesos. In total, that amounted to 2.9 billion pesos in Fortafin contracts for Coahuila.
(According to the Federal Auditor’s Office, Fortafin doled out 62.3 billion pesos in total; in 2017, auditors warned that the fund, which was created to replace the Economic Contingencies Program, lacked operating rules.)
Ramos Flores, who took office in February 2014, was accused by the FGR of embezzlement and the illicit use of funds and power under Moreira, who today is the national coordinator of deputies for the Institutional Revolutionary Party (PRI).
In a courtroom hearing that reportedly started on Tuesday and ended at dawn on Wednesday, Ramos Flores had his passport withdrawn so he would not leave the country. He also was asked not to leave the city of Saltillo, where he lives.
The federal judge said there was sufficient evidence that the crimes were committed and that the accused was probably involved. The FGR will have three more months to investigate.
The FGR also is investigating two other former high-level officials in Coahuila’s Finance Ministry, Antonio Zerón Puga and Nazario Salvador Iga Torre, but they have not yet been charged. A fourth man’s name was cited in the paperwork, but he died in 2018.
An investigation launched by the Attorney General’s Office in Chihuahua in 2016 found that funding through the Fortafin program was used to illegally funnel millions of pesos into PRI election campaigns. That diversion scheme was dubbed “Operation Sapphire.”
The man who reportedly authorized those funds was Alonso Isaac Gamboa Lozano of Mexico’s Budget Policy and Control Unit (UPCP); he also allegedly authorized the 2.9 billion pesos in Fortafin funding to Coahuila that Ramos Flores managed. Gamboa Lozano was murdered, along with his mother and three brothers, in Morelos in 2020, in connection to the alleged “Black Widow” case, a complex web of ghost companies, corruption and money laundering during Peña Nieto’s term as president.
Tour operators are optimistic about summer tourism in Ensenada.
Ensenada is looking forward to a big summer for tourism according to the head of the Baja California tour operators association (AatopBC). Gilberto Gamiño Herrera predicts this year’s tourism numbers are set to exceed those of pre-pandemic levels in 2019.
The state’s wine trail, beautiful beaches, nature adventures throughout the state, and gourmet dining draw tourists from across the country, but particularly northern Mexico and U.S. residents along the west coast. This summer, the added pull of several massive concerts and events will bring even more visitors, Herrera believes.
Among the upcoming events is the Baja Beach Fest, which will take place three weekends in August and bring big-name reggaeton stars Anuel, Yandel and Daddy Yankee to the peninsula, the Fiestas de la Vendimia in the Valle de Guadalupe celebrating the harvest season of the region’s vineyards and the Baja Blues Fest in Rosarito.
In response to problems recently experienced by ticket holders to receive reimbursement for a concert in Mexicali that was canceled at the last minute, Herrera insisted that the companies putting on this summer’s events are professionals.
“Of course we can’t help it if there is a last minute cancellation, but we can guarantee that ticket holders will be reimbursed. At AatopBC we don’t work with shady operations, these are serious businesses with roots in Baja California.”
Baja California has long been one of Mexico’s most popular tourism destinations and this year, Herrera says, many tour companies are already having to turn customers away because they are sold out for June and July. He has high hopes for beach travel and travel to the state’s wine region in the Valle de Guadalupe, but added that COVID protocols will still be in place to protect both tourists and tour operators.
“It’s very important due to the rise in COVID cases that we continue to apply hygiene protocols, the same as is being done in restaurants, hotels, and vineyards. We will continue to take care of each other.”
Security forces at the scene of the shooting in El Salto.
Four police officers were killed Wednesday night in a confrontation with armed subjects in the city of El Salto, Jalisco.
Local police responded to a 911 call late Wednesday night reporting that two individuals, bound and blindfolded, had been led from a van into a house by a group of armed assailants. As the police arrived on the scene they were met with a hail of bullets from inside the house and fired back on the aggressors, killing eight and wounding three. Four police officers were also killed on the scene during the exchange of bullets.
The three wounded assailants have been taken into police custody as well as the two kidnapping victims, who are receiving necessary medical attention. Also reported was a patrol car crashing into a tree nearby, believed to be part of the Zapotlanejo police force who were headed to the scene to help fellow police officers.
In response to the incident, Governor Enrique Alfaro Ramírez wrote on Twitter: “During this current moment in Mexico, we in Jalisco are clear that there cannot be a truce with those that would threaten our peace and calm. We will continue working.” He also expressed condolences to the families of the fallen officers and pledged to help them in any way possible.
City workers have been searching for the source of the leak for a week. Twitter @giogutierrezag
Crews continued working Thursday in a dogged attempt to discover the source of a massive water leak that has flooded one home in Mexico City and severely impacted two neighboring houses.
The search to find the leak has continued in vain for seven days, and approximately 30 families on the block have been affected. All the while, an estimated 200,000 to 400,000 liters of tap water are leaking per day.
“It’s enough that Aztec Stadium could be filled,” one resident said of the flooding.
The affected area, which happens to be right near the sprawling, 87,500-seat stadium, is in the Pedregal de Santa Úrsula neighborhood of Mexico City’s Coyoacán borough, an area known for its tree-lined, cobblestone streets, colonial architecture, sidewalk cafes and the bright blue Frida Kahlo Museum.
City workers inspect a flooded building in the Santa Úrsula neighborhood. Twitter @Alcaldia_Coy
In trying to find the leak, Mexico City’s water department Sacmex and other authorities have sent video inspection cameras into pipes, used geophones that can detect leaks by sound waves and tried other various instruments.
“This problem is not that easy to solve,” said Giovani Gutiérrez, the borough mayor. “This is a problem that needs instrumentation and so on. It’s not a common leak.”
The house that is being most impacted is a three-story structure in which water has covered more than 250 cubic meters in the lower part of the house. That family is using two pumps — one submersible electric pump and one that runs on gasoline — in an attempt to drain the stagnating water.
“This has been every day for three months,” said resident Francisco Ortiz, who woke up Wednesday morning to 40 centimeters of flooding. In an attempt to mitigate the damage, crews of no fewer than 20 workers have dug 10 holes in a 700-meter radius around his home.
A reporter shared video of city workers using pipe inspection cameras to look for the leak.
Sandra Martínez, a resident of the area, explained that the neighborhood was built on rocky outcrops, where there were many springs. “Some of those springs may be emerging now,” she said. However, the water was tested by colorimetry and was determined to be tap water rather than from an aquifer.
The problem was first pointed out to Sacmex in March, but after a few visits that included a hydraulic operation, the situation apparently was forgotten.
“They made an appearance,” Ortiz said. “And when they saw the size of the problem, they began to mobilize. But from then on, absolutely nothing happened” until the past week.
The leak has resulted in a problem of a scarcity of tap water in the neighborhood, which has worsened since the leak was first reported.
“It is a paradox that the water from the leak going down the drain, when we have to go buy bottles,” said one person who lives on the affected block defined by San León and San Celso streets.
President López Obrador at the site of the new refinery.
The cost of the state oil company’s new refinery on the Tabasco coast could blow out to more than double its original estimated price tag, according to a report by the news agency Bloomberg.
The Dos Bocas refinery, which will be officially opened July 2, could cost as much as US $18 billion, according to Bloomberg sources, a price tag that would be $10 billion higher than the project’s initial budget.
Citing people with knowledge of the matter who weren’t identified because they aren’t authorized to speak publicly about the refinery, Bloomberg reported that the value of Energy Ministry (SENER) contracts for work through to 2024 increased to over $14 billion in May. The sources said that the final cost of the project will probably be between $16 billion and $18 billion.
Pemex – the world’s most indebted oil company – and SENER were given responsibility for the project after the government concluded in 2019 that the bids it received from private companies were too high. President López Obrador said at the time that estimates ranged between $10 billion and $12 billion and none of the companies would commit to completing the project within three years.
Federal authorities didn’t respond to Bloomberg’s request for comment on the estimated $16-18 billion cost.
The news agency said that after a period of underspending due to the coronavirus pandemic, refinery construction costs increased significantly as new contracts were issued in order to have the project ready for inauguration. One source said the total number of contracts accounted for by Pemex has increased to about 270 from approximately 100.
Bloomberg said that cost overruns on the refinery project were likely to continue due to inflation, which was 7.88% in Mexico in the first half of June. The cost blowout undermines López Obrador’s austerity drive and “casts doubt on whether Pemex can fulfill its goal of producing all of its own gasoline, given how crucial the refinery is to the oil company’s efforts to end dependence on fuel imports,” the news agency said.
The president, a staunch energy nationalist, has set a goal of making Mexico self-sufficient for fuel by 2023. To achieve that, the federal government is upgrading Pemex’s existing refineries in addition to building the new one on the Tabasco Gulf coast, which will have the capacity to process 340,000 barrels per day (bpd) of crude and thus add about 20% to Pemex’s existing capacity. It also bought Shell’s 50% share in a Texas refinery that was jointly owned with Pemex.
The inauguration of the Dos Bocas project, which is officially called the Olmeca Refinery (the Olmec people lived in the Gulf coast area), will be attended by Pemex CEO Octavio Romero Oropeza, Energy Minister Rocío Nahle and López Obrador, a Tabasco native who is determined to reinvigorate the economy of Mexico’s southeast with large-scale infrastructure projects.
The inauguration won’t herald the commencement of full production as Pemex is not expected to reach its projected 340,000 bpd refining capacity for at least six months.
Writing in The Washington Post earlier this week, journalist Carlos Loret de Mola – a prominent critic of the president and federal government – charged that López Obrador will formally open a refinery “that doesn’t refine anything.”
“Not a single barrel of oil will enter and not a single liter of gasoline will come out of the Olmeca refinery,” he wrote.
“… The inauguration will be a simulation, a stunt motivated by AMLO’s ego,” Loret de Mola added, noting that the opening will come four years after López Obrador won the 2018 presidential election. “… On July 2, in reality only a ‘test phase’ will be inaugurated,” he said.
